Committee of shareholders will advise Baltimore Bancorp's board of directors

June 15, 1991|By Timothy J. Mullaney

Shareholders of Baltimore Bancorp handed management another defeat yesterday, but Chairman Harry L. Robinson said that he is confident that he will be able to keep control of the company.

Shareholders overwhelmingly approved a proposal that would force the company to set up a shareholder advisory committee, which would meet quarterly with the company's board of directors in an effort to make management listen more closely to shareholder concerns.

In other news, management said U.S. District Judge J. Frederick Motz has promised to rule by June 25 on all of the legal issues in Baltimore Bancorp's suit against a group of dissident shareholders. That decision would be subject to an appeal, which would probably be heard the week of July 8.

The close vote at the company's May 22 annual shareholders' meeting on a proposal to expand the company's 18-member board of directors to 28 seats left the fate of the company to the courts. If the board is expanded, insurgents led by Baltimore Blast owner Edwin F. Hale Sr. would gain control of the company. If it is not, Mr. Robinson stays in charge.

The proposal to set up the advisory committee was put forward by Barbara S. Larkin, a Severna Park woman who owns 20,000 shares of stock in the company, the parent of the Bank of Baltimore.

Mrs. Larkin's son, R. Andrew Larkin, is a member of the Hale slate of candidates for the board. But Mrs. Larkin and her late husband made the proposal before Mr. Hale launched a proxy fight to take over the company.

Only 1.4 million shares were voted against the Larkin proposal, ,, which management opposed. Shareholders voted 6.6 million shares for the proposal. The vote count is subject to revision because the polls were closed only minutes before the vote was announced.

William A. Hylton, Mrs. Larkin's lawyer, said that the margin was swelled by the fact that many of management's votes didn't count. To settle a suit by Mrs. Larkin alleging that the company's April 9 proxy statement and ballots misrepresented the vote required to approve the proposal, the company agreed to send out new ballots and count only votes received on the new ballots.

Votes supporting the proposal were counted no matter what set of ballots was used to cast them.

Management had said that the proposal needed an 80 percent vote to pass but later conceded that it required only a 50 percent vote.

Despite the latest vote, which follows defeat of six management-backed candidates for the board of directors and an apparent majority for the proposal to expand the board, Mr. Robinson was upbeat after announcing the vote on the Larkin proposal yesterday.

Management was fresh from a tactical victory Thursday night, when Judge Motz refused to order the company to hold a board meeting yesterday. Mr. Robinson said Mr. Hale's demand for a board meeting was a sign of "panic."

Attorneys for Mr. Hale had argued that the company's bylaws demanded a meeting immediately after the election of directors and that the election of six Hale-backed directors had been confirmed.

Management's attorneys said it made no sense for the board to meetuntil it is clear who controls its majority.

Mr. Hale's proposal to expand the board won a majority of the votes cast, excluding abstentions, but management is pushing three arguments which say that's not enough. Management has argued that it takes an 80 percent shareholder vote to expand the board, but Judge Motz appeared to be skeptical of that argument earlier this week. The company has also argued that abstentions should be counted in the number of votes cast, effectively making them "no" votes.

Management's main argument is that the company that counted the votes in the election improperly failed to count more than 1 million votes cast by two stock servicing firms. Those votes should have been cast against expanding the board, management said, because the servicing firms meant to give management authority to vote the shares as it wished.

But the ballots lacked any language giving management that authority, so the company that counted the votes refused to allow them.

The disputed ballots did not specifically address the issue of expanding the board. They were based on the company's April 9 proxy statement, which was sent out before Mr. Hale proposed the expansion.

Management has produced affidavits from the servicing firms saying the ballots were intended to give management discretionary authority. But the Hale slate yesterday released a May 17 New York Stock Exchange memo to member firms telling servicing companies not to vote any shares in the Baltimore Bancorp battle without specific instructions from the owners of the shares, who are the ultimate clients of the servicing firms, on each issue.

Dennis Gingold, a lawyer for Mr. Hale, said that at least 200,000 of the disputed shares voted against management's nominees for director, which he said makes it unlikely that all their owners wanted management to have authority to vote any way it wanted on other issues.